Contracting Strategies for Electrolyzers to Secure Grid Connection: The Dutch Case

TL;DR

This paper models the strategic interaction between electrolyzer projects and network operators in the Netherlands, revealing how different contracting strategies impact profitability and emphasizing the importance of coordinated decision-making under new grid congestion regulations.

Contribution

It introduces a bilevel optimization framework to analyze contracting strategies for electrolyzers and network operators, highlighting the effects of congestion management policies on profitability.

Findings

Voluntary congestion management increases electrolyzer profitability below 10 euro/MW CRC prices.

Ignoring the interaction overestimates profits for both parties.

Coordination is crucial for accurate profit assessment and optimal decision-making.

Abstract

In response to increasing grid congestion in the Netherlands, non-firm connection and transport agreements (CTAs) and capacity restriction contracts (CRCs) have been introduced, allowing consumer curtailment in exchange for grid tariff discounts or per-MW compensations. This study examines the interaction between an electrolyzer project, facing sizing and contracting decisions, and a network operator, responsible for contract activations and determining grid connection capacity, under the new Dutch regulations. The interaction is modeled using two bilevel optimization problems with alternating leader-follower roles. Results highlight a trade-off between CRC income and non-firm CTA tariff discounts, showing that voluntary congestion management by the network operator increases electrolyzer profitability at CRC prices below 10 euro per MW but reduces it at higher prices. Furthermore, the network operator benefits more from reacting to the electrolyzer owner's CTA decisions than from leading the interaction at CRC prices above 10 euro per MW. Ignoring the other party's optimization problem overestimates profits for both the network operator and the electrolyzer owner, emphasizing the importance of coordinated decision-making.